IDNs - What Pharma Needs to Know

One of the most rapidly emerging trends in healthcare is the formation of integrated delivery networks (IDNs). Manufacturers must understand what sets these large networks apart from traditional providers.

In past columns, I’ve written about strategies that pharmaceutical companies can take to protect their business in light of the massive consolidation of healthcare delivery organizations.  This month, I will discuss one of the most rapidly emerging trends in healthcare - the formation of integrated delivery networks (IDNs) - and what pharma needs to know about these important customers.

IDNs – what are they and what do they look like?

As the global healthcare industry moves toward a value based paradigm, all sectors are scrambling to adapt.  In this new healthcare environment, many providers are reacting to demands for high quality, low cost, and coordinated care by consolidating to form large organizations such as IDNs.  IDNs are large healthcare delivery organizations that either own or manage multiple points of patient care - from hospitals to physician practices to long term care facilities, and everything in between.  A commonly shared goal is that they strive to manage variation in cost and quality.  IDNs come in all shapes and sizes - if you’ve seen one, you’ve only seen one!  Some of these organizations are beginning to assume risk for the populations they serve. 

The concept of an IDN isn’t new - some of the best known (like Kaiser Permanente, Geisinger, and Mayo Clinic) have been around for quite some time.  When PPACA made it clear that healthcare providers would be held accountable for managing costs and improving quality of care, many looked to these well-known IDNs as models.  According to a September 2013 report1, there are 626 IDNs operating at 44,000 sites, employing 412,000 healthcare providers in the US.  These IDNs vary widely in terms of number of facilities, number of physicians, and the size of the markets that they serve. Some IDNs are groups of hospitals, and others cover the entire continuum of care.  Some IDNs are regional, and some have facilities and patients throughout the US, and even abroad.

What IDNs mean for Pharma

While IDNs share the goal of managing cost and quality of care, how they go about doing this may vary by organization.  As IDNs become more prevalent, it’s important that manufacturers understand how the needs and goals of IDNs impact the decisions they make about which drugs and devices to use.  Here are some important things that manufacturers need to know about IDNs:

  • IDNs leverage their size to negotiate prices. A key driver behind the growth of IDNs is the desire to leverage purchasing volume to obtain better purchase terms. For pharma, this ultimately means fewer, larger accounts with greater market power.  This will have important implications for how manufacturers approach and segment their markets. Manufacturers may need to restructure their sales force and enhance or develop strategic account management capabilities.
  • Administrators play a greater role in product decision-making.  IDNs big and small have one thing in common - decisions are moving away from the individual physicians toward administrators. Whereas the old paradigm saw individual physicians dominating decision making about drug and device purchases, administrators are playing a larger role, and institutional objectives are increasingly at the top of the agenda.  Broader use of group purchasing organizations, and other cost controls are an outcome.  A key point to remember is as IDNs adopt new policies, they don’t just apply to hospitals - they also apply to any physician group or outpatient center that is part of the IDN. Manufacturers need to understand how product decisions are made within an IDN and be able to provide data that demonstrates not only the clinical value of their products, but also the economic value.
  • Some IDNs are assuming risk for their patients.  A growing number of IDNs and other large provider organizations are starting to consider taking on risk in the form of bundled payments and population health management.  Some of this is driven by opportunity - CMS and its Center for Medicaid & Medicare Innovation (CMMI) have created a series of pilot models that involve various stages of risk management. Others are engaging with commercial payers and developing models for specific populations and subpopulations.  As they build these new payment models, they are developing predictive care paths that will promote consistent delivery of high quality, cost effective care.  Physicians who are IDN employees must adhere to formularies or justify their decision when they elect to use another product. As IDNs assume risk, they will look to manufacturers to do the same.  Manufacturers need to consider if - or how - they are willing to assume risk with these customers.


The driving forces behind healthcare consolidation are here to stay.  Providers are under tremendous pressure to control costs and deliver high quality care, and are increasingly joining and forming IDNs in response.  Manufacturers must understand what sets these large networks apart from traditional providers, formulate a high-level strategy for engaging new IDN decision makers and reconfigure pharma commercial models.  Next month, I’ll outline some practical steps for developing a coordinated IDN strategy.

Rita E. Numerof, President of Numerof & Associates, Inc. (Numerof).  Numerof is a strategy development and implementation firm with more than 25 years’ experience helping major pharmaceutical, device, diagnostic, payer and delivery organizations create and deliver value across healthcare. Experts in business model transformation, Numerof specializes in redesigning commercial models, developing economic and clinical value propositions, and crafting market access strategies for the pharmaceutical industry worldwide. For more information, visit our website at



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